Company Perspectives:

We are a leading housebuilder providing quality homes and services to our customers in a manner consistent with environmental requirements for the benefit of our shareholders, employees and the company at large.

Key Dates:

1946:

John T. Bell is joined by sons John and Russell to form the John T. Bell & Sons home building company in Newcastle.

British government launches "brownfield" initiatives; Bellway adopts new strategy to focus on London and southeastern region.

1997:

Kenneth Bell dies and is replaced by Howard Dawe as chairman; company sells more than 5,000 homes.

2001:

Company's average per-home sales price reaches £119,000.

Company History:

Bellway Plc is one of the top five home builders in the United Kingdom, selling more than 5,700 homes per year. The company, based in Newcastle, England, operates through a decentralized structure. Corporate headquarters provides financial and land management services, communications coordination, and management placement to a network of 14 more or less autonomous regional divisions. Each division is responsible for making its own decisions in such areas as housing types and design, materials and purchasing, construction methods, pricing, and sales, enabling divisions to tailor their business to the requirements of each local market. The approach, which backs Bellway's slogan as "the local, national housebuilder," has enabled the company to post consistent turnover and profit increases. In 2001, the company's sales neared £700 million, while profits passed the £100 million mark. Bellway constructs exclusively for the residential market, with offerings ranging from apartments to high-end single-family homes and prices ranging from under £30,000 to more than £500,000. The company's average home selling price topped £119,000 in 2001. Bellway has been particularly active in exploiting British government legislation calling for so-called "brownfield" development--that is, building on derelict land plots in urban markets. The company has consistently beat government-imposed quotas for brownfield development. In 2001, the company matched the 60 percent quota that builders are expected to meet before the year 2008. In all, Bellway owns or controls more than 16,700 land plots that have already received residential planning permission, and an equivalent number of land plots awaiting residential planning approval. The company is led by Chairman Howard Dawe and CEO John K. Watson, and is traded on the London Stock Exchange's 250 Index.

Postwar Construction Boom

The bombing of Britain during World War II reduced significant areas of the British residential housing to rubble. The postwar years presented new challenges and new opportunities for the country's construction industry. Much of the country's residential construction market had been placed under strict controls, and public sector building by the country's Housing Authority had grown to dominate residential housing to such an extent that private sector activity had been brought to a near standstill.

Building material shortages following the war and the slow progress of public sector reconstruction produced growing pressure for more private sector construction. A number of companies stepped in to fill the gap in new housing construction. One of these was the small family-owned firm led by John T. Bell, who was born in 1878. The company he began had long served its Newcastle-upon-Tyne community by the time that his sons, John and Russell, were decommissioned from the British Army in 1946. The younger Bells joined their father's business, which was then incorporated as John T. Bell & Sons.

The Bells rapidly sought to distinguish themselves from prevailing housing trends. The British residential landscape had long been marked by rather dreary designs, with housing laid out in straight lines, no front yards, and little landscaping in general. Residential communities rarely featured playgrounds, while few houses were large enough to include a garage. The Bell company brought its own designs to the market and began building a reputation for affordably priced housing. At the same time, the company launched a strong commercial development business as well.

During the 1950s, the Bell company began expanding throughout its northeastern England territory, offering a variety of home designs and layouts and other features. The company was joined by youngest Bell brother Kenneth Bell, who was later to lead the company as chairman for nearly 20 years.

In the 1960s, the Bell company spread to include much of the northern region of England. The company also entered Scotland during this decade. Supporting the company's growth was its decision to go public in 1963. John T. Bell died two years later. The economic boom years of the 1960s provided new demand for private housing, and the Bell company responded with a wide variety of home designs and an increasing number of features and options.

The decade saw dramatic changes in the construction industry itself, as new machinery and equipment and new building materials allowed houses to be built more quickly. Meanwhile, Bell maintained its commitment to innovative features, offering customers options such as central heating, insulation, and fully equipped kitchens, complete with washing machines.

Bell's housing activity increased rapidly during the 1960s, by the end of which the company boasted its participation in the building of Cramlington, in Northumberland, the first British town ever to be constructed by private companies. At the beginning of the 1970s, Bell began to eye its development as a nationally operating company, setting up its South East Division. The company's expansion plans were cut short, however, with the oil crisis of 1974, and the resulting recession that depressed the building market for much of the rest of the decade. Part of Bell's ability to survive the economic difficulties of the time was its policy of keeping all relevant operations in-house. This meant that the company controlled each step of the construction of a new house, acting as architect, engineer, estate planner, layout designer, and even landscaper.

National Expansion in the 1980s

Bell nonetheless managed continued growth for its residential housing business during this period, due to its careful financial policies and its continued focus on local markets. The company also continued to roll out new home features that attracted new home buyers. Such additions as central gas heating, improved insulation, heated bathrooms, and additional toilets became standard Bell home features. The company also began breaking away from the typical row house design to begin developing houses, which by then usually featured larger gardens and garages, around cul-de-sacs.

By the end of the decade, the company's private homes business had grown to represent a strong percentage of the company's overall operations. In 1979, the residential homes business was split off from the parent company's commercial properties wing, and renamed as Bellway. In 1981, the newly independent house building company went public, as Bellway Ltd.

Over the next decade, Bellway expanded throughout the United Kingdom, becoming a nationally operating home builder. Corporate headquarters remained in Newcastle; yet instead of centralizing all of the company's operations at its headquarters, Bellway, now led by Kenneth Bell, preferred a decentralized approach that allowed its regional divisions a great deal of autonomy in order to respond more appropriately to their local markets.

Bellway received a boost during the 1980s with the deregulation of the British banking industry. Home loans now became much easier to achieve, and a whole new class of buyer turned to Bellway for its homes. The company name became an important brand among new home purchasers during the decade. The Bellway brand was aided by the company's success at gaining industry approval, including winning a number of "What House? Best Innovation" awards.

By the end of the 1980s, Bellway was selling some 1,700 homes per year. The crash of the British housing market, and the international recession that followed, put a crimp in the company's growth, however. The building crisis was to last well into the 1990s, shaking up the British construction industry. Nonetheless, Bellway was able to continue to post sales gains, raising the number of homes sold per year to more than 2,000 by 1993, while clinging to profitability. The company, however, was forced to reduce its level of property acquisitions, as land prices began once again to climb.

Top Five Home Builder for the 21st Century

The British housing market emerged from its slump toward the middle of the 1990s. By then Bellway had held on to become one of the country's largest-volume home builders, planning to raise its sales to more than 4,000 homes per year by mid-decade. Aiding the construction market in general was new British legislation governing the implementation of so-called "brownfield" sites. Conceived as an urban renewal initiative, the new legislation, which also served to protect against over-development of the British countryside, called for home builders to devote a percentage of their activities to the development of derelict urban sites. Initially set at 50 percent, and then raised to 60 percent of new homes by 2008, the initiative encouraged home construction companies to return to the United Kingdom's cities.

Bellway became an active proponent of the brownfield initiative, buying up a number of urban properties, launching a number of new divisions focused on urban development projects, and outpacing the government's own timetable--in 1997, Bellway had already matched the initial 50 percent mark, and by the end of the decade had surpassed the 60 percent level as well. Examples of the company's brownfield projects included the conversion of a shuttered hospital complex into apartment units, and the building of a 5,000-home community on a 500-acre site in London. The latter project was also part of a change in the company's strategy, adopted in 1994, to focus its expansion efforts on the London and southeast market.

Kenneth Bell died in 1997 and was replaced by managing director Howard Dawe as acting chairman (Dawe was formally appointed chairman in 1999). By then, the company--along with the U.K. building sector--was back on track, posting revenue topping £398 million and unit sales reaching more than 5,000 homes in 1997. The company's profits were also strong, at £50 million on the year. The company was also benefiting from price increases, particularly in the booming southern region around London, helping the company's average total per-unit sale price to reach £77,200. Yet the company was reaping the rewards of its earlier decision to focus on the London and southern markets, where average home prices topped £93,000, compared to an average £64,000 in the north.

At the end of the 1990s, as the national housing market fully recovered, Bellway began to target especially high-end locations, enabling it to push its turnover and profits still higher. Difficulties in obtaining planning permission, as new home construction was subjected to stricter rules, made it more complicated for the company to achieve its expansion objectives, yet by 1999 the company had topped the 5,000-homes-per-year mark. In 2000, that figure had passed 5,700 homes, while for the first time, the company's average home selling price reached more than £100,000. At the same time, Bellway had been steadily increasing its land bank, with more than 15,000 properties already granted building permission, and an equal number of properties in the pipeline.

The year 2000 saw the beginning of a consolidation drive among the United Kingdom's home building industry. A number of the company's competitors were entering into a round of mergers and takeovers. Yet Bellway remained out of this competition, setting its sights on building up its own market share instead. As Alan Robson, the company's finance director, explained to the Financial Times: "We have been focusing on organic growth, but the recent consolidation has created opportunities for us to acquire land and staff, as companies reorganize themselves."

Poor weather and planning delays hampered Bellway's growth in 2001, however, and at 5,725 homes sold the company just barely topped its unit sales of the previous year. Yet the company's focus on higher-end properties, as well as its national position, enabled it to post a strong increase in per-unit sales, which topped an average of £119,000 in that year. Meanwhile, Bellway reported its sixth consecutive profit increase, and at the end of fiscal 2001, Bellway revealed profits topping £100 million for the first time in its history. With a land bank featuring nearly 17,000 plots with planning permission, and an equal number of plots awaiting permission--nearly a third of which were expected to receive planning permission in the coming fiscal year--Bellway seemed certain to remain one of the United Kingdom's top volume home builders.